FinTech in 2014 and what to expect in 2015

Written by: Mike Laven

Published on: January 06, 2015

Ever since the global economic crisis led customers to question the previously unrivalled traditional banking system, we have seen a wave of innovative players rising up and re-shaping old-fashioned banking models.

Over the past few years a host of new companies have shot up, offering alternative methods to everything from loans to foreign exchange services to investments.

While this FinTech revolution has been gradually gaining momentum, 2014 will forever stand out as a landmark year for the industry.

FinTech in 2014

As with any new technology or industry development, investors, government and regulatory bodies were initially cautious around this burgeoning sector, but as FinTech has continued to prove its value, the industry has finally made its way into mainstream conversations this year.

Innovate Finance, the trade body launched by George Osborne in August, is testament to the government sitting up and taking notice of alternative financial services.

The programme has pledged to support financial technology and promote alternative options alongside traditional services.

This milestone year for the industry is closing with a suitably ground-breaking event: the IPO of Lending Club, the world’s first public listing of a FinTech company.

The US-based peer-to-peer (P2P) lending platform was first rumoured to list on the public market late last year and is in part responsible for much of the noise and excitement that has enveloped the sector in 2014.

Thankfully, the IPO on the New York Stock Exchange on 11 December 2014 didn’t disappoint – the company’s share price shot up from $15 to $23.42 on its opening day – valuing the company at a whopping $8.5 billion (£5.4 billion).

What can we expect from 2015?

The Lending Club IPO serves as evidence of the potential the FinTech sector has to offer – something that government, investors and customers are all starting to take notice of.

The Financial Conduct Authority (FCA) is already investigating ways in which regulations can be adapted to better suit the evolving financial services sector.

Regulation is key to legitimising and providing credibility to the FinTech sector, but it is important that regulating bodies recognise that legislation based on old-world concepts and traditional banking functions does not fit today’s modern diverse banking landscape.

Meanwhile, we can expect a lot more innovation from the already buzzing FinTech sector, as newcomers are encouraged by the potential value of the industry.

So where does that leave traditional banks?

Offering transparent, cheaper, technology-focused alternatives to banking services that appeal to the ‘always connected’ nature of today’s customers, FinTech players are eating into the margins of banks.

Traditional financial organisations that refuse to adjust their models in line with the flexibility of their younger counterparts will struggle as the FinTech sector continues to gain pace in the New Year.

Nonetheless in the multi-trillion dollar global finance industry, there’s room enough for both traditional and new players. Smart banking institutions will be focusing on how they can collaborate, rather than simply compete with the growing force of FinTech.

This will certainly be an interesting space to watch in 2015, as new players race to innovate, government and regulatory bodies scramble to keep up, investors flock to the most promising companies and banks try to figure out where they can fit in with the FinTech movement.